XOM stock is worth over 30% more based on its historical yield, P/E, and P/Sales multiples
Exxon Mobil Corp. (NYSE:XOM) is not going to lower its
dividend no matter what it costs the company. That point came out loud and
clear from the company’s latest earnings conference call. This means that XOM
stock will continue to have a “strong” dividend yield of about 6.15%. It’s
worth at least 32% more, or $74.63 per share, based on its historical dividend
yield.
For the past two years (8 quarters) Exxon has paid 87 cents
per share in quarterly dividends. That works out to $3.48 per share each year.
Exxon clearly intends to maintain that dividend. Therefore, at today’s price
(April 9) of $55.87, the dividend yield is very healthy at 6.2%.
Target Price Based on Historicals
Moreover, based on the company’s historical dividend yield,
this is much higher than its average. For example, Morningstar reports that
over the past 5 years, its trailing 5-year dividend yield has been 4.96%
(almost 5%).
We can use this to estimate the normalized target value for
XOM stock. For example, if we divide the dividend per share of $3.48 by the
average yield of 4.96%, the result is a target price of $70.16 per share. This
represents a potential gain of $14.29 or about 26% more based on today’s price
of $55.87.
We can do the same thing with the company’s
earnings-per-share (EPS). Applying Morningstar’s 5-year avg. price-to-earnings
(P/E) ratio of 25.62 times (over the last 5 years) to Exxon’s EPS for this year
($2.87) produces a target price of $73.53. That is over 30% above today’s
price. Similarly using the Morningstar forward P/E average of 21.75 times
Exxon’s $3.88 EPS for 2022 produces a target price of $84.39.
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